Question

12. Galesburg Company makes a variety of paper products. One product is 20 pound copier paper, packaged 5,000 sheets to a box. One box normally sells for $18. A large bank offered to purchase 3,000 boxes at $14 per box. Costs per box are as follows. 8.00 GALESBURG COMPANY COSTS PER BOX FOR 20 POUND COPIER PAPER Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead 3.00 1.00 5.00 No variable marketing costs would be incurred on the order and the fixed manufacturing overhead will not change in total if the order is accepted. Should Galesburg accept the order? (a) No, income will decrease by $9,000. (b) Yes, income will increase by $6,000. (c) Yes, income will increase by $9,000. (d) No, income will decrease by $3,000. - 13. Macomb Company makes smart phones. Currently, Macomb makes all components for the smart phones it produces. An outside company has offered to supply one component, part number C62, for $8 each. Macomb uses 15,000 of these components per year. Unit costs of C62 are as follows. MACOMB COMPANY UNIT COSTS FOR PRODUCTION OF ONE UNIT OF PART C62 Direct materials $ Direct labor Variable manufacturing overhead Fixed manufacturing overhead 4.00 2.00 1.50 3.00

Answer 1

12.

Analysis of special order

Sales revenue (3,000 x 14)	42,000
Expenses:
Direct materials (3,000 x 8)	- 24,000
Direct labor (3,000 x 3)	- 9,000
Variable manufacturing overheads (3,000 x 1)	- 3,000
Net income	$6,000

Special order should be accepted since net income will increase by $6,000

Correct option is (b)

Note : Some portion of question 13 is missing. If you want me to solve question 13 also, then please provide the missing information,

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